6 ms·

I never understood why minimum wage labor was so expensive for fast food or pizza places, and that's pretty much what they're eliminating here. Maybe the answe

I never understood why minimum wage labor was so expensive for fast food or pizza places, and that's pretty much what they're eliminating here. Maybe the answer is that margins are so slim in the food business that any significant reduction in cost is bigger than it appears?

eli_gottlieb 9y ago
>Maybe the answer is that margins are so slim in the food business that any significant reduction in cost is bigger than it appears? Seems so. We've got people saying labor is the biggest cost for a restaurant or pizzeria, but that necessitates asking: holy shit, how can the value-add of a fresh, hot pizza over its unprepared ingredients be so low that it's worth cutting wages to below $8/hour by robotizing the work? If pizza really takes that much value as input, why does it have so little value as output?
- dragonwriter 9y ago
  > We've got people saying labor is the biggest cost for a restaurant or pizzeria, but that necessitates asking: holy shit, how can the value-add of a fresh, hot pizza over its unprepared ingredients be so low that it's worth cutting wages to below $8/hour by robotizing the work? In a competitive market, it's always worth reducing the cost of inputs. The restaurant business is generally a competitive market (it's actually a bit worse than an ideal competitive market for participants, because there are usually lots of unsustainable competitors selling below cost and losing money.)
  - eli_gottlieb 9y ago
    >(it's actually a bit worse than an ideal competitive market for participants, because there are usually lots of unsustainable competitors selling below cost and losing money.) This sounds like the problem. Shouldn't the government do something about these anticompetitive practices? I don't think a good economy involves "charities" driving the restaurant business to extinction.
    - likpok 9y ago
      I think you're assuming that the restaurants intend to be selling below cost. Running a restaurant is one of those businesses that everyone seems to think they can do. A somewhat common problem on Kitchen Nightmares was owners who didn't know how much they were spending on labor or food.
    - sokoloff 9y ago
      There are many Walter Mittys out "playing restauranteur" and no, I don't think the government should be in the business of telling people they're bad at business and stopping them from doing it. It's not like the local restaurant of the day is going to dump food on the market in mass quantities hoping to create and exploit a monopoly later.
    - opportune 9y ago
      It's actually caused by the structure of the restaurant industry itself. Almost all restaurants, even ones that become successful in the long term, lose money for the first few years. It's not the huge restaurants trying to price smaller ones out (although I'm sure this happens), it's amateur restauranteurs trying to break into the industry.
    - dragonwriter 9y ago
      > This sounds like the problem. Shouldn't the government do something about these anticompetitive practices? You mean, government should prevent owners from subsidizing operating costs as they try to establish and scale a business? Even if government wanted to do this in general (which would destroy Silicon Valley), how would it ever enforce it against millions of local small businesses, many of whom are doing it not out of deliberate strategy but simply out of lack of business skill? And, more importantly, how do you do it without creating barriers to entry that are themselves anticompetitive in a way which is much more consumer hostile?
- sokoloff 9y ago
  They're not cutting the wage rate. They're cutting the number of hours of work demanded per unit of output.
protomyth 9y ago
Check out all the other federal, state, and local costs associated with an employee. A $1/hr wage increase costs a business more than $1/hr.
twothamendment 9y ago
I think one reason minimum wage labor is expensive for a business has nothing to do with the hourly wage and everything to do with turnover, showing up late and not caring about getting things done right. Robots don't get hung over or ask for overtime or time off. I can see quite a few places from pizza to fast food where a little automation could greatly improve the quality and consistency of food. While traveling we hit a Pizza Hut. I hadn't been to one in years and wasn't expecting much. It was shockingly good. Fast forward a few days and we foolishly gambled again and they set a new bar for low. Same chain, same ingredients, same order - the only thing different were the people. If we can replicate the people who know how to make a good pizza and replace the ones who can't - I'm all for it.

eli_gottlieb 9y ago

>Maybe the answer is that margins are so slim in the food business that any significant reduction in cost is bigger than it appears? Seems so. We've got people saying labor is the biggest cost for a restaurant or pizzeria, but that necessitates asking: holy shit, how can the value-add of a fresh, hot pizza over its unprepared ingredients be so low that it's worth cutting wages to below $8/hour by robotizing the work? If pizza really takes that much value as input, why does it have so little value as output?

dragonwriter 9y ago
> We've got people saying labor is the biggest cost for a restaurant or pizzeria, but that necessitates asking: holy shit, how can the value-add of a fresh, hot pizza over its unprepared ingredients be so low that it's worth cutting wages to below $8/hour by robotizing the work? In a competitive market, it's always worth reducing the cost of inputs. The restaurant business is generally a competitive market (it's actually a bit worse than an ideal competitive market for participants, because there are usually lots of unsustainable competitors selling below cost and losing money.)
- eli_gottlieb 9y ago
  >(it's actually a bit worse than an ideal competitive market for participants, because there are usually lots of unsustainable competitors selling below cost and losing money.) This sounds like the problem. Shouldn't the government do something about these anticompetitive practices? I don't think a good economy involves "charities" driving the restaurant business to extinction.
  - likpok 9y ago
    I think you're assuming that the restaurants intend to be selling below cost. Running a restaurant is one of those businesses that everyone seems to think they can do. A somewhat common problem on Kitchen Nightmares was owners who didn't know how much they were spending on labor or food.
  - sokoloff 9y ago
    There are many Walter Mittys out "playing restauranteur" and no, I don't think the government should be in the business of telling people they're bad at business and stopping them from doing it. It's not like the local restaurant of the day is going to dump food on the market in mass quantities hoping to create and exploit a monopoly later.
  - opportune 9y ago
    It's actually caused by the structure of the restaurant industry itself. Almost all restaurants, even ones that become successful in the long term, lose money for the first few years. It's not the huge restaurants trying to price smaller ones out (although I'm sure this happens), it's amateur restauranteurs trying to break into the industry.
  - dragonwriter 9y ago
    > This sounds like the problem. Shouldn't the government do something about these anticompetitive practices? You mean, government should prevent owners from subsidizing operating costs as they try to establish and scale a business? Even if government wanted to do this in general (which would destroy Silicon Valley), how would it ever enforce it against millions of local small businesses, many of whom are doing it not out of deliberate strategy but simply out of lack of business skill? And, more importantly, how do you do it without creating barriers to entry that are themselves anticompetitive in a way which is much more consumer hostile?
sokoloff 9y ago
They're not cutting the wage rate. They're cutting the number of hours of work demanded per unit of output.

protomyth 9y ago

Check out all the other federal, state, and local costs associated with an employee. A $1/hr wage increase costs a business more than $1/hr.

twothamendment 9y ago

I think one reason minimum wage labor is expensive for a business has nothing to do with the hourly wage and everything to do with turnover, showing up late and not caring about getting things done right. Robots don't get hung over or ask for overtime or time off. I can see quite a few places from pizza to fast food where a little automation could greatly improve the quality and consistency of food. While traveling we hit a Pizza Hut. I hadn't been to one in years and wasn't expecting much. It was shockingly good. Fast forward a few days and we foolishly gambled again and they set a new bar for low. Same chain, same ingredients, same order - the only thing different were the people. If we can replicate the people who know how to make a good pizza and replace the ones who can't - I'm all for it.